Ad hoc notification of Deutsche Telekom AG
- In organic terms, excluding changes in the consolidated group and exchange rate fluctuations, net revenue increased by around 7.4 percent in the first 6 months of 2004.
- Reported net revenue up by 4.4 percent to approximately EUR 28.4 billion.
- Group EBITDA increased by 11.0 percent year-on-year from EUR 9.6 billion to EUR 10.7 billion; adjusted EBITDA up by 3.2 percent to EUR 9.4 billion.
- Organic growth of adjusted Group EBITDA at 5.2 percent
- Results from ordinary business activities quadrupled in the second quarter to EUR 2.4 billion.
- Net income boosted by 64.5 percent from EUR 1.1 billion to EUR 1.8 billion; adjusted for special factors, it more than tripled from EUR 0.3 billion to EUR 1.0 billion.
- Free cash flow before dividend payments increased from EUR 4.0 billion to EUR 4.2 billion.
- Net debt reduced by an additional EUR 3.3 billion to EUR 43.3 billion compared with EUR 46.6 billion at the end of 2003
- Full-year net income projected to at least double year-on-year to EUR 2.5 billion.
- Deutsche Telekom's CEO Kai-Uwe Ricke announces intention to pay an attractive dividend for the 2004 financial year
Information and elaborations of the issuer concerning this ad hoc notification
Overview of selected key figures (second quarter of 2004)
Overview of selected key figures (first half year of 2004)
Deutsche Telekom significantly increased its net revenue in the second quarter of 2004, too. Year-on-year, revenue rose by EUR 0.8 billion, or 6.0 percent, to EUR 14.4 billion in the second quarter. Consequently, revenue growth was substantially stronger than in the first quarter (2.7 percent). Revenue was reduced by negative exchange rate effects amounting to EUR 0.5 billion - in particular from the translation of U.S. dollars - and by consolidation effects totaling EUR 0.3 billion that relate, for example, to the deconsolidation of T-Com's cable companies as well as to deconsolidation measures at T-Systems. Adjusted for these effects, organic revenue growth amounted to 7.4 percent.
Deutsche Telekom's substantial revenue growth was again driven by the positive business development at the T-Mobile and T-Online divisions. Both in the second quarter and in the first half of 2004, T-Mobile achieved a growth rate of approximately 12 percent, which is primarily attributable to the sustained expansion of the subscriber base. T-Online, which boosted revenue by more than 11 percent both in the first half and in the second quarter of this year, made a significant contribution to the positive development of the Group, in particular by continuing its broadband strategy.
In spite of the difficult economic and regulatory environment, T-Com managed to stabilize its revenue performance. The decrease in total revenue amounted to 3.8 percent in the second quarter, compared with 6.9 percent in the first three months of 2004. The revenue decline in the first half thus totaled 5.4 percent.
In the first half of 2004, T-Systems kept its revenue at a virtually constant level year-on-year. In the second quarter of 2004, the division's revenue clearly increased by 2.3 percent year-on year and 6.1 percent quarter-on-quarter.
Group EBITDA amounted to EUR 6.2 billion in the second quarter of 2004 - up EUR 1.4 billion or 30.7 percent year-on-year. EBITDA in the first half of 2004 amounted to EUR 10.7 billion, a year-on-year increase of 11.0 percent.
The second quarter of 2004 saw positive special factors amounting to EUR 2.0 billion from income relating to the write-up of U.S. mobile communications licenses (EUR 1.8 billion), and the sale of SES and Virgin shares (each around EUR 0.1 billion). However, EBITDA was impacted by special factors from the recognition of accruals totaling EUR 0.6 billion relating to the dissolution of the U.S. mobile communications joint venture. Special factors totaling EUR 1.3 billion had a positive effect on EBITDA in the first half of 2004.
Adjusted for special factors, Group EBITDA increased by EUR 0.2 billion, or 4.0 percent, to EUR 4.8 billion in the second quarter, with the largest growth contribution coming from T-Mobile.
In the first half of 2004, adjusted EBITDA amounted to EUR 9.4 billion - up EUR 0.3 billion, or 3.2 percent, year-on-year. All the divisions of the Group contributed to this increase. Organic growth in adjusted EBITDA was significantly above 5 percent. Adjusted EBITDA increased at a slightly lower rate than revenue which is mainly due to the increase in subscriber acquisition costs as part of the growth strategy. The adjusted EBITDA margin declined moderately from 33.3 percent in the first half of 2003 to 33.0 percent in the period under review.
The increase in net income by 64.5 percent to EUR 1.8 billion is mainly attributable to clearly improved results from ordinary business activities. In the first half of 2004, Deutsche Telekom recorded income tax expenses amounting to EUR 0.7 billion, compared with tax income of EUR 0.2 billion in the prior-year period. Adjusted for special factors (in particular net income relating to the dissolution of the mobile communications joint venture in the United States), net income more than tripled year-on-year to around EUR 1.0 billion.
In the first of half of 2004, free cash flow increased by EUR 0.2 billion year-on-year to EUR 4,2 billion. This is the result of offsetting effects: an improvement in net cash provided by operating activities - driven in particular by the improvement in operational business and an increased positive balance from income tax refunds and payments - set against a higher level of spending on property, plant and equipment.
Free cash flow in the second quarter of 2004 amounted to EUR 1.3 billion, a year-on-year decrease of EUR 0.7 billion attributable to higher investments and a decrease in netted tax received/paid.
Net debt was reduced to around EUR 43.3 billion in the first half of 2004. This means that around EUR 1.3 billion of debt has been repaid since the end of March 2004. This was possible in particular due to the continued positive free cash flow and the proceeds from the sale of SES shares.
Year-on-year, net debt was reduced by around EUR 9.7 billion.
Results from ordinary business activities quadrupled year-on-year to more than EUR 2.4 billion in the second quarter of this year. In the first six months, the results from ordinary business activities amounted to around EUR 2.8 billion, clearly exceeding the 2003 full-year figure of EUR 1.4 billion.
In view of its results for the first half-year, Deutsche Telekom has revised and increased its forecasts for certain key performance indicators for the second half of the year.
The significantly improved operating performance means, for the full financial year, we expect to triple the results from ordinary business activities of just over EUR 1.4 billion we achieved last year to EUR 4.2 billion. Deutsche Telekom is aiming to increase its net income by at least 100 percent to EUR 2.5 billion compared with 2003. Deutsche Telekom's CEO Kai-Uwe Ricke announced the intention to pay an attractive dividend for the 2004 financial year.
Free cash flow in 2004 is now expected to reach at least EUR 7 billion, after an original forecast of EUR 6 billion. The expectation that adjusted EBITDA will grow from EUR 18.3 billion to at least EUR 19.2 billion remains unchanged. In mobile communications in United States, Deutsche Telekom now expects to have around 17 million subscribers by year-end, representing approximately 4 million net additions in 2004. Deutsche Telekom also expects the number of broadband customers to increase from the original target of 5.0 million to at least 5.6 million by year-end.
Selected key figures of the divisions
T-Com
T-Mobile
T-Systems
T-Online
The T-Online figures shown here were calculated in line with the provisions of German GAAP, as applied throughout the Deutsche Telekom Group, and do not correspond to the figures published by T-Online International AG in accordance with IFRSs, as T-Online International AG and Deutsche Telekom AG do not apply the same accounting policies.
Group Headquarters & Shared Services
1)EBITDA: Deutsche Telekom defines EBITDA as the results of ordinary business activities before net financial income/expense, including income related to subsidiaries, associated and related companies, amortization, and depreciation, and before other taxes; for a detailed explanation of these figures, see "Recon- ciliation of pro forma figures" at www. Telekom.de/investor-relations".2) For detailed information, see "Reconciliation of pro forma figures" at "www.telekom.de/investor-relations"
T-Com
T-Mobile
T-Systems
T-Online
Group Headquarters & Shared Services
1)EBITDA: Deutsche Telekom defines EBITDA as the results of ordinary business activities before net financial income/expense, including income related to subsidiaries, associated and related companies, amortization, and depreciation, and before other taxes; for a detailed explanation of these figures, see "Recon- ciliation of pro forma figures" at www. Telekom.de/investor-relations".2) For detailed information, see "Reconciliation of pro forma figures" at "www.telekom.de/investor-relations"
This notification contains forward-looking statements that reflect the current views of the Deutsche Telekom management with respect to future events. Forward-looking statements are based on current plans, estimates and projections, and therefore too much reliance should not be placed on them. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Deutsche Telekom's control, including those described in the sections "Forward- Looking Statements" and "Risk Factors" of the Form 20-F submitted to the U.S. Securities and Exchange Commission. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, Deutsche Telekom's actual results may be materially different from those expressed or implied by such statements. Deutsche Telekom does not assume any obligation to update forward-looking statements to take new information or future events into account. In addition to the figures shown in accordance with German GAAP, Deutsche Telekom also shows so-called pro forma figures, e.g., EBITDA, adjusted EBITDA, net debt, and free cash flow. These pro forma financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with German GAAP. For a definition of these pro forma figures, please refer to the explanations under "Reconciliation to pro forma figures" on Deutsche Telekom's Investor Relations website at www.deutschetelekom.com.
